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Walgreen Reaps Rewards of Rx

The nation's top pharmacy keeps on rolling, but investors might want to keep an eye on the new ventures.

Maybe there are some folks out there who don't like the fact that Walgreen(NYSE:WAG) doesn't do regular dial-in conference calls. Not me -- with earnings season about to ramp up, I'm grateful not to have to listen to 20 iterations of "great quarter, guys" and niggling questions about why earnings were a fraction of a cent higher or lower than some analyst thought they'd be.

This is certainly a case where different is good. Although the company came up a little short of the average revenue estimate with growth of just over 10%, earnings were up about 5% over last year's first quarter, and earnings per share were actually just a bit above the average expectation.

Walgreen's overall comparable-store sales rose a healthy 7.2% for the quarter and prescription sales did even better. Prescriptions, which still make up about two-thirds of the total, were up 10.3% overall and 7.7% on a comp-store basis. And it would seem that this mix of growth is slated to continue -- not only does the company expect a bump in sales from the new Medicare drug plan and new generic introductions this year, but it's also going to expand its store count by more than 9% by adding as many as 475 stores this year.

Honestly, I'm a little surprised that there's still so much room for new store builds -- sometimes it just feels to me like you can't swing a cat without finding a pharmacy. Be that as it may, Walgreen is also looking to grow the business in other ways. It recently acquired a specialty pharmacy focused on infertility drugs, as well as a California home infusion services provider.

By no means am I suggesting that Walgreen is moving away from its store-based pharmacy business. But if you step back and reconsider its business as being about delivering drugs and other products and services to consumers, then there are plenty of similar types of acquisitions that could add some incremental revenue, profitability, and cash flow.

Now, what about the stock? Is it cheap? The answer, whether you look at it in isolation or in comparison with rivals like CVS(NYSE:CVS), Rite Aid(NYSE:RAD), or partial rival Wal-Mart(NYSE:WMT), would be something along the lines of "heck, no." But then, I've sort of grown accustomed to this stock never being all that cheap. And that's a little sad for me, because at the right price this high-ROIC company would be an interesting purchase.